US Dollar rose to its highest level in 6 weeks in the last sessions of the week, why?

The US dollar achieved strong gains in the last trading week, driven by a series of strong US economic data, with the markets increasing expectations that the US Federal Reserve will continue its tightening approach.

Dollar trades now

Looking at the dollar’s trading on Friday, we note that the US dollar index, which measures the performance of the US currency against a basket of currencies, rose strongly by about 0.64%, to trade around 104.52 points.

Dollar trading this week

In terms of weekly trading, the US dollar recorded a strong rise in today’s trading, heading towards recording remarkable weekly gains for the third consecutive week; As the total dollar gains since the first sessions of the week until now were estimated at approximately 1.00%.

The most important factors affecting the dollar’s bullish movements in today’s trading

The strength of recent US economic data

The economic data cast a positive shadow on the dollar’s trading today, as the data released yesterday revealed the positivity of the US producer price index data at the end of last January, as the index, which is one of the main indicators for measuring inflation, recorded a growth of about 0.7% during January, which exceeded market expectations. This enhanced the prospects for the US Federal Reserve to continue the monetary tightening cycle. In other words, raising interest rates; Which reflects positively on the US dollar.

The US jobless claims data provided more support for the dollar; As the number of US jobless claims increased by 196 thousand new applications this week, which was less than the market expectations; Which supported the bullish momentum of the dollar’s trading; Supported by the strong impact of this data on the US employment market, and then the strength of the dollar at the end.

The hawkish rhetoric of the US Federal Reserve members escalated

The recent statements of some members of the US Federal Reserve in support of raising interest rates at a continuous rate significantly strengthened the dollar’s trading. In this regard, the US Federal Reserve member Bullard said yesterday evening that inflation is still very high. The bank’s moves will continue to reduce high inflation in the United States, along with increases additional interest rates.

A member of the US Federal Reserve, Mester, agreed in this perception, who stated that bullish inflationary risks still exist; Therefore, the US Federal Reserve’s intention to raise interest rates by 50 basis points at its next meeting looks pretty logical and the US Federal Reserve will need to exceed the current interest rate to more than 5% and stay for a while.

These statements strengthened the movements of the US dollar in today’s trading due to the growing market expectations regarding the US Federal Reserve continuing its tightening approach by raising interest at a greater pace.

Expectations of a slowdown in the growth of the US economy receded
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The rise of the US dollar in the last trading sessions of the week is due to the growing positive expectations about the strength of the US economy. As a member of the US Federal Reserve, Bullard, stated that the country’s economy is growing faster than it was in the second half of 2022, adding that the number of vacancies is still at a high level; In the end, it provided support for the dollar currency during transactions.